Fed Funds vs SOFR: Fed Funds, OIS, Swaps

The OIS rate or the indexed swap rate as the formal term asks the question, how much does money cost to borrow and where will the rate trade in 30, 90 and 180 days. SOFR is factored from $1.3 trillion by Repo Rates and trades between 4.72 to 4.87 or 15 basis points.

Ever wondered what destroyed markets? The OIS and Swap markets trade all the money once originated for broader markets and trade in tiny interest rate ranges. At 15 basis points won’t hardly move 1 pip to a currency price. Then we have interest rate swaps from nation to nation and trade within a few basis points.

The major banks, money market funds, pension funds and institutions left the market for the Swap market to trade giant sums of money inside tiny ranges.

As Libor was eliminated, new interest rates were introduced. The FED now uses SOFR, the Secured overnight Funding Rate.

Current Fed Funds 4.83.

30 day SOFR 4.82367.

90 day SOFR 4.64596.

180 day SOFR 4.33380.

The percentage for Fed Funds at 4.83 to trade 4.82367 in 30 days is 23% or 77% against at 1.00 minus 23.

The percentage for Fed Funds to trade 4.64596 in 90 days is 22% or 78% against at 1.0 minus 22.

The percentage for Fed Funds to trade 4.33380 in 180 days is 20% or 80% against at 1.0 minus 20.

 Factor 0.0483 Fed Funds X SOFR Rate = percentages.

Fed watch tool

475-500 (Current) percentages Basis Points.

Current = 14.6%.

1 day 9.95%.

1 week 18.1 %.

100 minus 14.6 = 85.4% and matches exactly the Fed Watch tool.

100 minus 9.95 = 90.05%. 100 minus 18.1 = 81.9%.

500 – 525 Basis Points.

Today 85.4%.

90.5% for 1 day.

81.9 for 1 week.

16.8 for 1 month or 83.2% against by 100 minus 16.8.

Fall back rate

30 day

4.83 to 4.93815 = 23% or 77%.

90 day

4.83 to 4.90757 = 23% or 77%.

180 day

4.83 to 4.76206 = 23% or 77%.

Add the Fed Watch tool indicator as not needed or required.